Although it's most closely associated with its big green coin-counting machines, Motley Fool Hidden Gems recommendation Coinstar
That may be changing. In addition to not being as lucrative, bulk vending and cranes have also been experiencing some lower sales volumes due to weaker foot traffic. That weighed in on Coinstar's fourth quarter, which was at the low end of management's guidance.
More exciting was Coinstar's investment in RedBox, a joint venture with McDonald's
While that's good news in terms of growth and acceptance if it actually happens, it's going to be hitting Coinstar's bottom line in the meantime. The coin-counting company had expected RedBox to be profitable by mid-2007, but instead now expects it to cost $4 million to $5 million this year in losses because of the ramp-up in new installations. As a 47% owner of the enterprise, it has to pay out its share of any expenses for these new installs, and such a huge increase will require Coinstar to be paying out a lot for the next few years.
The kiosk movie rental concept is an interesting one that would be a challenge to the dominance of online movie and bricks-and-mortar rentals, represented by Netflix
It was a lackluster quarter that seemed to be putting in place factors which may help growth in the future. But the company's entertainment sector is sluggish, offsetting what should have been a better performance with its e-payment and coin-to-card or coin-to-e-certificate programs. Partnerships in the latter are growing, and the company expects Wal-Mart
Management didn't see its price as a particular bargain this quarter, as it engaged in no stock buybacks despite having a standing program in place. With a trailing P/E of 45 and a forward multiple of 32, it doesn't look like there will be any bulk vending of shares anytime soon, either.
Coinstar is a recommendation of Motley Fool Hidden Gems. See what Tom Gardner was counting on to make this company a winner with a 30-day free trial subscription. Netflix is a Motley Fool Stock Advisor pick, and Wal-Mart is a Motley Fool Inside Value selection.